Most retirees earn income from at least a couple of sources. You could be supplementing the income from your superannuation with part-time work or the aged pension. You may decide to sell the family home or release some equity from your home. Or you might have an investment portfolio. Each of these options has its pros and cons.
In this blog we take a look at investing outside of super as a way of growing your retirement income.
Be a smart investor
Relying on your superannuation alone to accumulate enough wealth for retirement is increasingly unrealistic, especially with the changes to super contribution rules. So it’s more important than ever to consider investments outside of super.
To be a smart investor you need to plan, research and understand your investments and how they fit with your financial goals.
This is as true for retirees as it is for those in the accumulator years. Yet very few of us have the financial expertise to do all of this.
And often times we’d rather leave the hard work to experienced people. Which is where the support of a trusted financial adviser is invaluable.
Consult with an expert
A financial adviser will explain the myriad of investment assets and determine which are the best fit for you.
They will work with you to build an investment strategy that meets your needs and is structured to last.
Ensuring you are getting the best advice is especially critical for retirees because the consequences of a poor investment decision can be more serious as there’s less time to make up for losses.
Remember, your investment decisions will affect how much money you have to spend in retirement.
Choose an adviser who puts you first
So work with a financial adviser who delivers a strategy that will provide you with a reliable, long-term income stream. Choose an adviser who puts you first.
This will be someone who really takes the time to fully understand your goals and your current financial status. It will be someone who involves you in the journey at every stage of the planning and implementation process.
It will be a firm who stay in regular communication with you and who are ready to adapt your investment strategy should your circumstances change.
At First Financial, we use a unique, client-first methodology to get an honest picture of your retirement profile. So we’re able to choose an asset allocation and build a portfolio that matches your needs and your tolerance to market risk.
Security is important when you need a reliable, long-term income stream.
For a retiree this means cash-flow is delivered when you need it. Even when the markets fall.
Diversification helps you ride out the ups and downs of financial markets by spreading your money across different asset classes.
This is even more important for retirees – if you lose money it will be hard to replace.
Capital growth investments, such as property and shares, are good if you want to invest your money for the long term (more than 7 years).
These investments will generally increase in value over time. Of course, they can also fall in value from time to time, as the global financial crisis showed.
Growth investments will hopefully also pay dividends. You can use these as income, or reinvest them for further growth.
The First Financial Approach
At First Financial any asset allocation we consider for clients has been pre-approved by our unique Investment Committee made up of external consultants as well as in-house specialists.
This means clients can be reassured knowing the investments we recommend have been through a rigorous approval process.
The advisors draw from a pre-approved list of around 200 of the highest quality investments.
When considering assets, we look for those that produce significant stable income streams over those where returns primarily come from capital gains. We like large cap equities that provide a more stable cash-flow and more transparency than some managed funds.
We prefer mainstream assets that are easily understood. We like liquid assets that are easily accessible. We don’t make or sell our own products, so we know when we recommend a product we’re doing so with only the client’s best interests at heart.
Once we have created a retirement portfolio which delivers a reliable, long-term income stream we then go about securing that cash-flow as best we can against future market volatility. We do this by separating the portfolio into three distinct buckets.
We maintain 12 months’ income in the cash bucket. The second fixed-interest bucket holds one to five years cash-flow in low-risk assets.
Each client has a third, long-term investment bucket which houses the five-year-plus growth portfolio. This is where we hold capital investments that are subject to market volatility.
So our clients know that, in the event of a market downturn, they would have three to four years of secured cash-flow.
Speak to the experts
At First Financial we provide guidance with all of the investment steps. We see our role as one of collaboration.
We provide market intelligence and prudent financial advice so you can make decisions that match your investment profile and goals.
If you are interested in considering investments outside of super but aren’t sure where to start, get in touch with a First Financial adviser today.